Over last few years, more and more Indian applicants are applying for patents outside India. This trend is shown by the increase in the number of patent applications filed by Indian nationals at the US Patent & Trademark Office[i], the nodal office granting patent rights in the US. The charts below show the stats of patents filed by and granted to Indian nationals at the USPTO. Interestingly, the number of patent applications filed by Indian nationals in the US these days is comparable to the number of domestic patent applications filed by Indian nationals at the IPO[ii].

Source: USPTO Annual Report

There could be many reasons for such selection. One of the reasons could be the essential market of the product embodied in the patent. Another reason could be faster patent prosecution. In comparison to rest of the world, the patent prosecution time is generally much lesser at the USPTO. Typically, the first office action is issued within 12-18 months from the filing of a patent application at USPTO.

Another important factor that affects the decision of the applicant to first apply for patent in the US might be domain of the technology. Although the criteria regarding patent eligibility are becoming stricter in US as well in light of landmark cases like Bilski v. Kappos[iii], Mayo v. Prometheus[iv], and Alice Corp. v. CLS Bank International[v], the general feeling is that the USPTO considers most of the inventions as patent eligible unless it specifically falls under excluded subject matter. This might also be true for software inventions, which are generally patent ineligible subject matter in many countries including India. In comparison, software inventions are usually patentable at the USPTO, provided the software invention qualifies the various tests laid out by US Supreme court.

Accordingly, the US is a destination of choice for India’s huge IT/ software sector to file for patents. Not to forget, the ever-growing patent market of the USA has always bestowed a competent opportunity to the patentee to exploit patent rights to their advantage.

In-house captives in India

It is also very interesting to know that many multi-national corporations including American ones have been using their technology centers in India to add to their patent portfolio worldwide. These companies use the technology staff at their Indian centers to create solutions and directly file application for patents outside India, especially the US to protect their innovation. Some of the notable companies, which have been actively working on such model in India, are General Electric (US), Honeywell (US), Accenture (US), Google Inc. (US) and Motorola (US). Below are the data showing the number of patents granted and the number of published patent applications at the USPTO (where one or more inventors have Indian nationality) for these companies in last 5 years.

Table showing the number of patents granted and published patent applications with at least one inventor with Indian nationality; *Source: WIPS

First Filing outside India and the Implications of Section 39 of the Indian Patents Act

According to provisions in Indian Patent Laws, the Indian statutes do not provide unrestricted rights for directly foreign filing patents outside India. According to Section 39 of the Indian Patents Act,

(1) No person resident in India shall, except under the authority of a written permit sought in the manner prescribed and granted by or on behalf of the Controller, make or cause to be made any application outside India for the grant of a patent for an invention unless—

(a) an application for a patent for the same invention has been made in India, not less than six weeks before the application outside India; and

(b) either no direction has been given under sub-section (1) of section 35 in relation to the application in India, or all such directions have been revoked.

(2) The Controller shall dispose of every such application within such period as may be prescribed:
Provided that if the invention is relevant for defence purpose or atomic energy, the Controller shall not grant permit without the prior consent of the Central Government.

(3) This section shall not apply in relation to an invention for which an application for protection has first been filed in a country outside India by a person resident outside India.

Therefore, the provisions of Section 39 require applicants to obtain a foreign filing license or first file their patent in India. This forces multinational companies operating in India having captive units in India to be cautious when a patent application for protection of an invention is first made directly outside India. The provisions require them to obtain a foreign filing license (FFL) from the Indian Patent Office or first file their application in India. Since filing Indian priority application could lead to complications in foreign prosecution, most often these companies would find the provisions of applying for a foreign filing license as more practical and appealing.

Repercussions of not following Section 39

In case an applicant does not follow provisions of Section 39, he/she may face the penal provisions under Section 40, which could lead to revocation of their corresponding patent in India. Below is the quoted section from the Indian Patents Act:

Section 40

Without prejudice to the provisions contained in Chapter XX, if in respect of an application for a patent any person … makes or causes to be made an application for grant of a patent outside India in contravention of Section 39 the application for patent under this Act shall be deemed to have been abandoned and the patent granted, if any, shall be liable to be revoked under Section 64.

According to Section 40, if a person has not complied with the requirements under Section 39, then any corresponding Indian patent application shall be treated as abandoned. In case, a patent has already been granted, it is liable to be revoked under Section 64[vi].

In addition to the above, there are penal provisions of serious nature when the requirements under Section 39 are contravened by a person. As stated, Section 118 recites as follows:

Section 118

If any person ….. makes or causes to be made an application for the grant of a patent in contravention of section 39 he shall be punishable with imprisonment for a term which may extend to two years, or with fine, or with both.

The provisions clearly state that if a person has contravened the directions under Section 39, he shall be punishable with imprisonment for a period extendible to TWO years, or fine, or both. The Indian system is crucial and secretive about inventions developed within the Indian Territory unless the invention passes the test of secrecy. If you are a company, it is better to obtain a license than have a punitive action taken against the management later on.

Obtaining FFL in case of directly filing a PCT application:

One of the questions that are also commonly asked is the applicability of Section 39, in case the applicant is desirous to file the first application as a PCT application. This question was discussed in famous case law named Puneet Kaushik V. UOI[vii].

In this case, the applicant had applied for PCT (India as the Receiving Office) and submitted an application for foreign filing license under Section 39 simultaneously at the Indian Patent Office. Among the two, the application for the license was accepted and taken on record by the IPO whereas the PCT application was not. However, the patent office later accepted the PCT application and gave a later filing date after grant of the foreign filing license to the applicant.

The applicant filed an appeal at the Delhi High Court demanding the PCT application to be accorded the same date as the application date for obtaining foreign filing license. The applicant argued that since the PCT has been filed with India as Receiving office[viii], there should not be any need of obtaining the foreign filing license at the first place. Therefore, the PCT application should be accorded the same date as the foreign filing license application date.

But it was argued by the IPO that even if the PCT application is filed at the Indian Patent Office with India as the receiving office, the application is forwarded to WIPO which is an International body and the applicant is required to wait for the issuance of foreign filing license. The permission to file patent application outside India is generally granted by the IPO within 21 days from the date of such request by the applicant. To this, the court held:

“The legal consequences flowing from a PCT application filed in the Indian Patent office are that of an application filed outside India. The Receiving office is only empowered to assure that a PCT application is in conformity with all the prescribed documents under the treaty. All further processing is done by the International Bureau and the International Searching Authority.”

Therefore, it is essential on part of the applicant to understand and be cautious while filing a first application as a PCT application to avoid rather burdensome implications of Section 40 and Section 118.

Obtaining FFL in case the invention is conceived outside India:

A question that is asked commonly is the applicability of Section 39 to inventions conceived by Indian residents outside India. Interestingly, in Section 39, the sub-section 3 states that if the application for patent has been filed outside India by a person resident outside India, the requirements of sub-section 1 shall not apply. It is to say that if an inventor is of Indian origin and residing at the US, has invented his invention in the United States, and has filed a patent application at the USPTO, then the provisions of Section 39(3) preclude them from seeking permission from the Indian Patent Office. Accordingly, FFL from India is not required for inventors working for companies abroad for inventions conceived out of India.

Obtaining FFL in case the inventor (s) is/are Indian residents, the applicant is non-Indian & the application is made outside India:

There are situations when an inventor is an Indian resident but has assigned his invention rights to a foreign entity. Global MNCs have their R & D departments at multiple locations across the globe. They are often desirous to file application for a patent in their home country when the inventions are developed outside home country, say in India. The question is whether in such cases, the Indian resident inventor or the assignee is liable for obtaining foreign filing license from the IPO?

It should be noted that the provisions of Section 39 require any person making or causing to make an application outside India to obtain permission for routing the invention outside India in order to apply for a patent. The foreign assignee might argue that since he/she is not resident in India, the provisions of Section 39 do not apply, and he might be correct.

However, such assignment does not devolve the duty of the inventor as he/she could be construed as the one causing the application to be made outside India by way of assignment.

Therefore, the inventor should insist the assignee or apply himself and get the FFL before the patent application is filed outside India.

Obtaining FFL in case of joint research between Indian resident inventors and non-resident inventors:

An invention is often a result of joint research between Indian resident inventors and non-resident inventors. An inventor residing at India and an inventor residing at say Singapore may develop an innovative product working at R & D department of a company located at India and Singapore respectively. It may happen that the applicant company foresees better market opportunities at United States and is keen in obtaining exclusive patent rights in US rather than in India or Singapore. The applicant company should then file a patent application at the USPTO. In such situations, the question is whether the India residing inventor must seek permission from the IPO before the patent application is filed at the USPTO?

The answer to this question is similar to the answer in case of assignment. That is even though the assignee might be non-resident of India, the Indian inventor could still be considered to be causing an application to be made outside India without following the due process of law. Accordingly, the inventor should insist the assignee or apply himself and get the FFL before the patent application is filed outside India.

Patent rights are territorial in nature and every country follows its own procedure for protection of rights. It is essential to understand the practice followed. As described above, non-compliance of laws may lead to penal consequences and revocation of patents in some countries. Even though, Indian applicants can find good business opportunities by obtaining patent rights for their inventions outside India, they should be cautious of the foreign filing restrictions as some of the restrictions are of punitive nature. Similarly, captives of various multinational companies may see a lot of benefits in using the Indian technical workforce to add to their global patent portfolio, but they should not forget to follow proper compliance when first filing their applications outside India.